Reserve Bank
of Australia in its latest financial stability review report points to some countries
such as Brazil, India, Indonesia and have increased their
foreign currency borrowings in recent years.
"Depending on whether and how they
hedged, the profits of some corporations might come under pressure because of
domestic currency depreciation... and slower economic growth."
The Report also
points out that increased exposures of advanced economy investors to emerging
market corporations and sovereigns in recent years may be a channel through
which financial stresses in emerging markets spill over to advanced economies.
Liquidity
risk might be underpriced by some investors.
There is
apparent over-investment in some sectors of the Chinese economy such as real
estate and heavy industry
Risks in
China are particularly prominent for highly leveraged firms, including some
firms in the oil and gas industries that are exposed to a decline in energy
prices and construction firms that have raised significant foreign currency
denominated bond funding in recent years.
Many Chinese local governments
have large debts, and land sales account for a sizeable share of their revenues
(Note: Emphasis ours)
Reference: http://www.rba.gov.au/publications/fsr/2015/oct/pdf/global-fin-env.pdf
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